Custom, Excise & Service Tax Tribunal
Amba River Coke Ltd vs Mumbai(Prev) on 3 June, 2022
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH
CUSTOMS APPEAL NO. 85365 OF 2017
(Arising out of Order-in-Original No. CCP/ADJ/AKJ/06&07/2016 dated 30.11.2016
passed by the Principal Commissioner of Customs (Preventive), Mumbai)
M/s Amba River Coke Ltd. ...Appellant
nd
2 Floor, Innovation Centre
Geethapuram, Dolvi, Taluka Pen,
District Raigad-402 107
VERSUS
Principal Commissioner of ...Respondent
Customs (Preventive),
Marine & Preventive Wing
2nd Floor, New Customs House,
Ballard Estate,
Mumbai 400 001
APPEARANCE:
Shri Vipin Jain, Shri Vishal Agarwal and Shri Abhishek Kapadia, Advocates
for the Appellant
Shri S.K. Mathur, Special Counsel for the Department
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. C.J. MATHEW, MEMBER (TECHNICAL)
Date of Hearing: 27.04.2022
Date of Decision: 03.06.2022
FINAL ORDER NO. A/85506/2022
JUSTICE DILIP GUPTA:
M/s. Amba River Coke Ltd. 1 has filed this appeal to assail the
order dated 30.11.2016 passed by the Principal Commissioner,
Customs (Preventive) Mumbai 2 , adjudicating the two show cause
notices, both dated 20.05.2016, issued to the appellant and M/s. JSW
1. the appellant
2. the Principal Commissioner
2
C/85365/2017
Steel Limited. The present appeal concerns the notice issued to the
appellant only. The order holds that 9,43,614 MT of Iron Ore
concentrate valued at Rs. 5,26,12,34,168/- imported under 18 Bills of
Entry are classifiable under Customs Tariff Item 3 2601 11 50 of the
Schedule to the Customs Tariff Act, 1975 4 and so the appellant would
not be entitled to avail the benefit of exemption from payment of
Countervailing Duty 5 on the product under section 3(1) of the Tariff
Act in terms of serial no. 56 of the Table contained in the notification
no. 12/2010-CE dated 17.03.2012 6. The Principal Commissioner has,
accordingly, determined the demand of differential CVD of Rs.
69,32,07,587/- and since the said amount was deposited by the
appellant, it was appropriated. The Principal Commissioner has also
directed for payment of interest and has also imposed fine and
penalty.
2. The appellant is engaged in the manufacture of iron ore pellets.
One of the raw materials required for the same is iron ore fines.
3. The dispute in the instant appeal relates to 18 consignments of
iron ore fines imported by the appellant from Vale International SA,
Switzerland, which had described the goods as Iron ore Carajas Sohar
(iron ore fines). The specifications contracted, as set out in one of the
purchase order dated 24.09.2014, are as follows:
Fe SiO2 Al2O3 P Mn Moisture +6.3mm +1mm -0.15mm
Product 64.00 3.40 1.90 0.060 0.750 8.5 18.0 50.0 25.0
3. CTI
4. the Tariff Act
5. CVD
6. the notification dated 17.03.2012
3
C/85365/2017
4. Along with the commercial invoice and the packing list, the
supplier also provided a Certificate of Analysis to the appellant. A
specimen Certificate of Analysis dated 26.12.2014, which sets out the
chemical composition and the physical specification of Iron ore Carajas
Sohar, is as under:
I) Chemical Composition (on Dry Basis)
Fe SiO2 Al2O3 P MN LOI
64.77 PCT 2.30 PCT 1.27 PCT 0.025 PCT 0.45 PCT 2.37 PCT
II) Physical Specification (on Wet Basis):
12.5 MM 5MM 0.5 MM 6.3 MM
4.8 PCT 17.5 PCT 59.1 PCT 13.6 PCT
5. The appellant classified the iron ore fines under CTI 2601 11 31
and claimed exemption from payment of CVD in terms of the
notification dated 17.03.2012, which grants complete exemption from
payment of excise duty to "ores".
6. The relevant entry in the said exemption notification is as under:
In exercise of the powers conferred by sub-section (1) of
section 5A of the Central Excise Act, 1944 (1 of 1944) and in
supersession of *******, the Central Government, being
satisfied that it is necessary in the public interest so to do,
hereby exempts the excisable goods of the description specified
in column (3) of the Table below read with relevant List
appended hereto and falling within the Chapter, heading or
sub-heading or tariff item of the First Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as
the Excise Tariff Act), as are given in the corresponding entry in
column (2) of the said Table, from so much of the duty of
excise specified thereon under the First Schedule to the Excise
Tariff Act, as is in excess of the amount calculated at the rate
specified in the corresponding entry in column (4) of the said
Table and subject to the relevant conditions annexed to this
4
C/85365/2017
notification, if any, specified in the corresponding entry in
column (5) of the Table aforesaid:
Sl. Chapter or Description of Rate Condition
No. heading or sub- excisable goods No.
heading or
tariff item of
the First
Schedule
(1) (2) (3) (4) (5)
1 ***** ***** ***** *****
to
55
***
56 2601 to 2617 Ores Nil -
7. All the 18 Bills of Entry were provisionally assessed during the
period October 2014 to January 2015. In the course of assessment,
samples were drawn by the Customs Authorities and sent for testing.
Testing was undertaken to carry out a complete analysis of Fe, SiO2,
Al2O3, P, Mn, LOI, moisture percentage. The Test Report reads as
follows:
"The Sample is in the form of moist brown colour powder and
small friable lumps of irregular shape and size. It is mainly
composed of Iron Oxide with small amount of silica, Aluminum
and Manganese.
Moisture = 4.5%
Iron Content (as such) = 61.6%, Fe2O3 = 88.0%
Loss on Ignition = 6.0%
SiO2 = 2.0%
Al2O3 = 2.1%
Manganese = 0.18%
It is other than agglomerated Iron Ore and Iron Ore fines.
Remnant may be collected within 7 days."
8. In the course of the finalization of assessments, the
Superintendent of Customs (Preventive), by a letter dated 28.10.2014,
called upon the appellant to explain as to whether the goods imported
were iron ore fines or the same were iron ore pellets, as from the
website of Vale International, SA, Oman it appeared that they were
5
C/85365/2017
manufacturers of iron ore pellets. The appellant, by letter dated
04.12.2014, pointed out that the consignment of iron ore fines had
been imported from Oman Plant of Vale International. The said iron
ore fines were nomenclated by Vale International as Iron ore Carajas
Sohar and the same were formed by blending two products imported
from Vale International Brazil namely, Iron ore Carajas and Iron Ore
concentrate. Along with the said reply, a clarification dated 10.11.2014
received from the supplier was also attached. The Department sent a
letter dated 31.12.2014 asking the appellant to furnish the details of
the blending operations carried out by the supplier of Iron ore Carajas
Sohar at Oman. A letter dated 13.1.2015 was sent by the appellant
explaining that at Oman, Vale International was receiving Iron Ore
Carajas and Iron Ore concentrate from Brazil and was blending them
using the yard and equipment available at the port. The blend had a
proportion of 90-95% of Iron Ore Carajas and 5-10% of Iron Ore
concentrate. The appellant addressed another letter dated 27.3.2015,
wherein it explained that the Iron ore Carajas Sohar is formed through
a blend/mixing operations of two products imported from Vale Brazil
namely, Iron Ore Carajas and Iron Ore concentrate. The Iron Ore
concentrate was produced by Vale from its Southeastern System in
Brazil and that the same had iron content of around 66.65% and that
84% of the consignment had a particle size of (- 0.015mm). As
against this, the iron content in Iron ore Carajas Sohar was around
64.34% and about 18% of the consignment had particle size of
(+6.3mm), while 50% of the consignment had a particle size of
(+1mm) and that only 25% of the consignment had a particle size of
(-0.15mm).
6
C/85365/2017
9. The provisional assessments were finalized by the Deputy
Commissioner of Customs (Preventive) by order dated 25.05.2015
holding that the goods were correctly classified by the appellant under
CTI 2601 11 31 and were consequently entitled to the benefit of
exemption under the notification dated 17.03.2012.
10. However, an enquiry was later initiated by the officers of the
Marine & Preventive Wing of the Commissionerate in regard to the
imports of iron ore fines. In the course of investigation, statements of
the personnel of the appellant and the Custom House clearing agent
were recorded. The investigating authority also sought opinions from
Professor Walmik Rathod, Department of Mechanical Engineering at
VJTI, Mumbai and Shri D.K. Swamy, Administrative Officer the Indian
Bureau of Mines, Ministry of Mines.
11. Thereafter, a show cause notice dated 20.05.2016 was issued
stating that the appellant was not entitled for exemption under entry
no. 56 of the notification dated 17.03.2012 for the reasons:
(i) The ores and concentrates are two distinct excisable goods by
virtue of Chapter Note 4 to Chapter 26 of the Tariff Act. This
Chapter Note stipulates that the process of converting ores into
concentrates shall amount to manufacture;
(ii) The global website of Vale records a stage-wise process
undertaken on Iron Ore at Carajas, Para, Brazil. It was evident
from the website that the mined ore atleast underwent two
preparation processes namely, crushing and screening to make
them suitable as sinter and pellet feed. The website shows that
the screening process at Carajas, Para, Brazil employs as many
as 17 production lines. Crushing and Screening are two of the
7
C/85365/2017
inclusive special processes, listed in the HSN Explanatory Notes
for production of Iron Ore concentrate;
(iii) The ore after being crushed and screened is shipped by
Vale International SA, Switzerland from Brazil to their other
facility at Oman, where blending is undertaken to produce Iron
Ore Carajas Sohar;
(iv) The said Iron Ore Carajas Sohar is an outcome of the process of
blending or grading after having already undergone crushing
and 17 cycle screening process at Carajas, Para, Brazil; and
(v) It is evident from the webpage of Vale that washing of ore is
undertaken at Carajas, Para, Brazil mines, so as to remove the
impurities of mu, slag, gangue and other impurities.
12. The appellant filed a reply dated 16.09.2016 to the show
cause notice and submitted that the CBIC had by Circular dated
17.2.2012, after consulting the concerned line ministry i.e. the
Ministry of Mines, clarified that the process of converting ore into
concentrates involved removal of whole or part of the foreign matter.
The process of crushing and screening did not result in removal of
whole or part of the foreign matter and that it is only when the
processes such as milling, hydraulic separation, magnetic separation,
floatation and concentrate thickening were undertaken that it could be
said that the ores were converted into concentrate. It was submitted
that admittedly the ore at Carajas, Para, Brazil only underwent the
process of crushing and screening, which as clarified by the CBIC, did
not result in the concentration of the ore. Also the process of blending
90-95% of iron ore with 5-10% of iron ore concentrate also did not
result in removal of part or whole of the foreign matter so as to qualify
8
C/85365/2017
as a concentrate. The appellant also sought cross examination of Dr.
Walmik Rathod of VJTI and Shri D.K. Swamy, Administrative Officer at
Indian Bureau of Mines. The appellant also placed reliance on the
opinion of Shri R.C. Prasad, Ex-Professor IIT, Bombay as also on the
opinion of Dr. S.J. Gopalkrishna, Chairman-Department of PG Studies
& Research in Mineral processing, Vijayanagra Sri Krishnadevarya
University.
13. The allegations leveled in the show cause notice were upheld,
placing reliance on an extract from the website of Vale from which an
inference was drawn that beneficiation process to remove impurities
by use of water was being undertaken by Vale at Carajas, Para, Brazil
and the goods were classified under CTI 2601 11 50. The relevant
portion of the order is reproduced below:
"238. This is a case, where importations had been made by
the two noticees, to directly feed their sinter and pallet plants,
without undertaking any beneficiation processes. Such direct
feeds had to have a high iron content, low presence of
impurities, close particle size etcetera. To obtain such sinter
and pallet feeds; the mined ore needed to be a processed or
prepared iron ore. It is for this reason that the two noticees
mainly imported iron ore carajas sohar, which had these
characteristics. The Carajas mines may have produced iron ore
with high iron concentration; but, geology and geographical and
customer considerations necessitated processing and preparing
of such mined ore. It was also a fact that these ores were
mined from different mines in Carajas, not necessarily having
similarly high iron content. It was for this reason that to meet
the requirements of the needs of the two noticees, the
processed and prepared iron ore carajas was further blended in
the Vale facilities at Sohar in Oman with pallet fine feed
tubarao, in the ratio of 90:10 to enable supply of iron ore
carajas sohar to them. The blending process was carried on the
iron ore carajas, after the mined ore at Carajas underwent the
processes of crushing, grinding, milling, screening, scrubbing,
froth floatation, concentration, thickening, drying, and
9
C/85365/2017
dewatering etcetera using their own technology and processes,
including dry beneficiation processes Tale at its ore processing
facilities of Vale.
239. The HSN explanations defined and explained these
needs and requirements explaining the distinction between the
ore and ore concentrates and the physico and physico chemical
processes requisites therefor. Its plain litera explained that ore
per se could not be used for further metallurgical operations
because of gangue deficiencies. The removal of these
deficiencies, resulting in, consequent, upon concentration of the
iron content in the prepared or processed concentrate was the
norm to enable the user to undertake such further metallurgical
operations."
14. Shri Vipin Jain, learned counsel for the appellant assisted by Shri
Vishal Agarwal and Shri Abhishek Kapadia, made the following
submissions:
(i) The Explanatory Notes to the HSN clarify that for the purpose of
Heading 2601 to 2617 the term 'concentrate' applies to 'ores'
which have had part or all of the foreign matter removed by
special treatments, either because such foreign matter might
hamper subsequent metallurgical operations or for economical
transport. It is evident from the aforesaid Explanatory Notes to
HSN that 'concentrate' is a reference to 'ore' which has had all
or part of the foreign matter removed by special treatment.
Conversely, if there is no special treatment undertaken on the
'ore' so as to remove part or whole of the foreign matter, it
cannot be considered as a concentrate;
(ii) This position has also been clarified by the CBIC in its Circular
dated 23.03.2012. The Circular notes that doubts had been
raised on the issue as to whether the term 'ore' would include
concentrate and whether the insertion of Chapter Note 4 in
Chapter 26 of the Tariff Act, would have any impact on the
10
C/85365/2017
admissibility of the exemption available to ore. The CBIC has,
by relying upon the Explanatory Notes to the HSN, clarified in
the Circular dated 23.03.2012 that the term concentrate applies
to 'ores' which have had part or all of the foreign matter
removed through special treatments and accordingly the
exemption that applies to ore would no longer be available to
concentrates, as by virtue of Chapter Note 4 to the Tariff Act,
ores and concentrates are two distinct commodities;
(iii) The Supreme Court in National Minerals Development
Corporation vs. State of MP 7, by referring to the dictionary/
technical material, held that concentrate consists of enriched ore
segregated from waste in a concentration plant;
(iv) The CBIC has, after consulting the concerned Ministry of Mines,
by Circular dated 17.02.2012, clarified that crushing and
screening are mere preparatory processes and do not constitute
the special treatment envisaged in the Explanatory Notes, by
which part or all of the foreign matter is removed. In other
words, it has been clarified that ores that have been merely
subjected to the processes of crushing and screening cannot be
said to have been concentrated, as the said processes do not
result in removal of part or whole of the foreign matter;
(v) Both, the show cause notices and the impugned order, have in
passing, contended that processes, beyond crushing and
screening, have been undertaken on the Iron Ore at Carajas,
Para, Brazil. However, there is not even an iota of evidence to
even suggest, let alone prove, that further or other processing
had taken place at Carajas, Para, Brazil. The burden to prove
7. 2004 (6) SCC 281
11
C/85365/2017
that processes beyond crushing and screening had been carried
out was on the Revenue, which it failed to establish; and
(vi) The Principal Commissioner, has in paragraph 119 and 120 of
the impugned order, held that Vale was using water for removal
of impurities, which fact was evident from the pictorial
representation hosted on their official website and was
corroborated by the ANA-IBRAM's 2013 report. This incorrect
finding has been arrived at by incorrect extrapolation of the
pictorial representation in the impugned order. The show cause
notice had not made any reference to the aforesaid pictorial
extract from the website.
15. Shri S.K. Mathur, learned special counsel appearing for the
Department, however, made the following submissions:
(i) The appellant have mentioned that the Iron ore supplied from
Oman is a blend of 90-95% Iron ore Fines of Carajas, Brazil with
5-10% of Iron Ore Concentrates. Thus, what is imported is not
Iron Ore which is naturally extracted from the mines but Iron
ore subjected to processes crushing, screening, blending etc.,
for removal of impurities such as Alumina and Silica to make it
fit for direct use in the furnace. Iron Ore with 95% purity is
none else than Iron Ore concentrate which was not declared by
the appellant and the actual contents were suppressed with
intention to avail exemption from payment of CVD under
notification dated 17.03.2012;
(ii) Excerpt from the official website of Vale clearly shows that
Carajas is situated in the Amazonian tropical rain forest and the
mined ore is heavy in water content;
12
C/85365/2017
(iii) Irrespective of the processing done, it remains a fact that the
test report of sample at VJTI mentioned 95% concentration of
Fe2O3 which means it was an Ore (concentrate) directly
capable for feeding into the furnace;
(iv) Dr. Rathod is a qualified Engineer in Metallurgy and the test of
the sample of Ore Carajas Sohar was carried out in the
laboratory in his presence. The percentage of contents revealed
that the ore is concentrate. This leaves no ambiguity;
(v) The report given by Indian Bureau of Mines is an authoritative
report; and
(vi) Irrespective of the processes carried out at Carajas Sohar
and at Oman, the Iron ore sample test report revealed that it is
high in concentration and therefore not the one declared by the
appellant in the Bill of Entries.
16. The submissions advanced by the learned counsel for appellant
and the learned special counsel appearing for the Department have
been considered.
17. The first issue that arises for determination in this appeal is
whether the process of crushing and screening undertaken on the Iron
Ore after it was mined at Carajas, Para, Brazil and its subsequent
blending at Oman with 5-10% iron ore concentrate, would result in the
goods imported being classifiable under CTI 2601 11 50 as Iron Ore
concentrate, as against CTI 2601 11 31 for Iron Ore fines, and
consequently whether the benefit of the exemption from payment of
CVD at Serial. No. 56 of notification was available to the imported
goods in question.
13
C/85365/2017
18. The second issue that arises for consideration is whether the
burden was on the appellant to establish its entitlement to exemption
under the notification dated 17.3.2012 or the said burden had shifted
on the Department, since the benefit of the exemption had been
extended not only at the time of clearance of the imported goods but
also at the time of finalisation of the provisional assessment.
19. It would be seen that the main controversy that has arisen for
determination in this appeal is as to whether the product that has been
imported by the appellant is Iron Ore (fines) or Iron Ore (concentrate).
'Concentrate' has neither been defined in the Notes to Chapter 26 of
the Tariff Act nor in the notification dated 17.03.201. HSN also does
not provide a separate classification for ore that is concentrated or
otherwise. In fact, it is only in Chapter Note 4 to the Central Excise
Tariff Act, 1985 that a distinction is sought to be drawn between ore
and concentrate and it is as follows: "In relation to products of this
chapter, the process of converting ore into concentrates shall amount
to manufacture". The Explanatory Notes to HSN clarify that for the
purpose of Heading 2601 to 2617, the term 'concentrate' applies to
'ores' which have had part or all of the foreign matter removed by
special treatment, either because such foreign matter may hamper
subsequent metallurgical operations or for economical transportation.
It is, therefore, clear that 'concentrate' is a reference to 'ore' which
has had all or part of the foreign matter removed by special treatment.
In other words, if no special treatment has been undertaken on the
'ore' so as to remove part or whole of the foreign matter, it would not
be considered as a 'concentrate'.
14
C/85365/2017
20. This position also emerges from the CBIC Circular dated
23.03.2012 which is reproduced below:
"Circular No. 9/2012-Cus., dated 23-3-2012
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject: Applicability of exemption under Sr. No. 4 of the
Notification 4/2006-CE., dated 1-3-2006 on import of
Ore Concentrates - regarding.
Doubts have been raised whether on imports of Ore
Concentrate classifiable under Chapter 26 of the First Schedule
to the Customs Tariff Act, 1975, the benefit that is admissible
to "Ore" under Serial Number 4 of the Notification No. 4/2006-
CE., dated 1-3-2006 can be granted to the "Concentrate" of
that Ore. The issue was taken up for discussion during the
Conference of Chief Commissioners of Customs on Tariff and
allied matters held in May 2011.
2. The matter related to: (a) whether the term 'Ore'
includes Concentrate, and (b) Whether insertion of Chapter
Note 4 in the Chapter 26 will have any impact on the
admissibility of notification benefit to Concentrates, was
examined. The Conference noted the HS definitions of Ore and
Concentrate are as follows:
"The term 'ore' applies to metalliferous minerals
associated with the substances in which they occur and
with which they are extracted from the mine; it also
applies to native metals in their gangue (e.g.
metalliferous sands").
"The term 'concentrates' applies to ores which
have had part or all of the foreign matter removed by
special treatments, either because such foreign matter
might hamper subsequent metallurgical operations or
with a view to economical transport".
It was also seen that the recent changes in the Central
Excise Tariff treating the concentration of ore as amounting to
manufacture would not in any way change the definition of Ore
or Concentrate for the purpose of classification. This has been
reiterated in a number of judgments and also vide Board
Circular No.696/12/2003, CX dated 26-2-2003 [2003 (152)
E.L.T. T44].
15
C/85365/2017
3. In view of Chapter Note 4 to Chapter 26 of CETA, 1985
inserted vide Finance Act 2011, Ores and Concentrates are two
distinct products. Thus, Concentrates suffer Central Excise duty
being a manufactured product. The implication for imported
Concentrates is that the benefit of exemption of additional duty
of Customs leviable under Section 3 of Customs Tariff Act, 1975
in terms of a notification that applies only to Ores is no longer
available to Concentrates, even if Concentrates and Ores fall
under the same tariff heading.
4. Thus, it is concluded in the Conference that the
benefit of exemption notification under Sr. No. 4 of the
Notification 4/2006-CE., dated 1-3-2006 will be available
only to imported Ores and not to imported
Concentrates."
(emphasis supplied)
21. The show cause notice, in paragraph 18, has explained that
foreign matter like alumina and silica contained in the ore, being the
gangue, is required to be removed from the ore, and this process is
called beneficiation. The relevant extract arising from paragraph 18 of
the notice reads as follows: "Beneficiation is a process, which removes
the gangue particle, like alumina and silica etc. from the iron ore.
Basically it separates Fe2O3 or Fe3O4 from other impurities in the iron
ore. In this process, the iron content is improved to the maximum
possible extent. The highest can be 70%, i.e. the possible purest
form".
22. What needs to be noticed is that the Supreme Court in National
Minerals Development Corporation held, after referring to the
dictionary/technical material that 'concentrate' consists of enriched ore
segregated from waste in a concentration plant.
23. The relevant portion from the dictionaries, referred to in the
aforesaid judgment of the Supreme Court are:
16
C/85365/2017
"(I) Dictionary of Mining Terms by Paul Thrush & Staff of
the Bureau of Mines, 1968, edition, reprinted, 1990
'concentrate' is defined as follows:
a) In mining the product of concentrate used in
plural form as arrangement for treating the
concentrate were complete.
b) Concentrate are called ore.
c) In mining, to separate ore or metal from its
containing rock or earth.
d) The concentrate of ore always proceeds by steps
or stages.
(II) Dictionary of Mining Terms by Paul W. Thrush and the
Staff of the Bureau of Mines (1968), reprint 1990)
'concentrate' is defined as follows:
a. In mining, the product of concentration. Used in
plural form as "arrangements for treating the
concentrates were complete." Concentrates are called
ore at Joplin, Mo.; mineral at Michigan copper mines; and
tailings in Black Hawk, Colo. Fay. b. In mining, to
separate ore or metal from its containing rock or earth.
The concentration of ores always proceeds by steps or
stages. Thus the ore must be crushed before the mineral
can be separated, and certain preliminary steps, such as
sizing and classifying, must precede the final operations,
which produce the finished concentrates. Ricketts, I. c.
Can. Enriched ore after removal of waste in beneficiation
mill. Hoffman. d. The clean product recovered in froth
flotation. B.S. 3552, 1962. e. To intensify in strength or
to purify by the removal of valueless or unneeded
constituents; condense; intensify. Standard, 1964.
(III) Chambers Science and Technology Dictionary
'concentrate' and 'concentrate plant' are defined as
under:
'Concentrate plant' (Min.Ext). Concentrator mill,
reduction works, washing, cleaning plant. Buildings and
installations in which ore is processed by physical,
chemical and/or electrical methods to retain its valuable
17
C/85365/2017
constituents and discard as tailings those of no
commercial interest.
'Concentrate' (Min.Ext.). The products of concentration
operations in which a relatively high content of mineral
has been obtained and which are ready for treatment by
chemical methods."
24. It is, thus, evident from the HSN Explanatory Notes as also from
the judgment of the Supreme Court and the dictionary meanings relied
upon therein, that iron ore concentrate refers to an ore that has been
subjected to special processes for removal of all or part of the foreign
matter i.e. gangue contained in the ore, with which it naturally occurs.
25. The HSN Explanatory Notes do not specify what would construe
to be special treatments by which the foreign matter is removed from
the ore. However, the CBIC, after consulting the Ministry of Mines, has
clarified this aspect by a Circular dated 17.02.2012 and the relevant
portion is reproduced below:
"Circular: 332/1/2012-TRU dated 17-Feb-2012
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject: Dutiability of "iron ore" and "iron ore concentrates"-
Clarification regarding.
A reference has been received from Bhuwaneswar Zone
seeking clarification on the issue of whether "Iron ore lumps
and fines" are dutiable as "concentrates" when subjected to
crushing, screening, sizing or washing etc.
2. In Budget 2011, a Note was inserted in Chapter 26 of
the First Schedule to the Central Excise Tariff to deem the
process of converting "Ores" into "Concentrates" as a process
amounting to manufacture. Both ores and concentrates are
classifiable under Chapter 26 and while the term 'Ore' is
defined in Note 2 of the said chapter, the term 'concentrate' is
18
C/85365/2017
not. HSN Explanatory Note spell out the scope of the term
"Concentrate" as under:
"For the purposes of Headings 2601-2617, the
term 'concentrates' applies to ores which have had part
or all of the foreign matter removed by special
treatments either because such foreign matter may
hamper subsequent metallurgical operations or with a
view to economical transport."
From the above definition, it is clear that removal of part
or all of foreign material is envisaged for conversion of ores into
concentrates. Ministry of Mines have clarified that no special
treatment is involved in the crushing and screening of ore and
the end-product can be termed as a concentrate only when the
grade of ore is sufficiently improved through beneficiation.
Federation of Indian Mineral Industries have also pointed out
that several processes (in addition to crushing and screening)
such as milling, hydraulic separation, magnetic separation,
floatation & Concentrate thickening have to be undertaken for
ores to be converted into concentrate.
3. Hence, it is clarified that the levy of excise duty is
attracted only in cases where the product meets the definition
of concentrate as per HSN Notes, that is, 'ores which have had
part or all of the foreign matter removed by special treatments
either because such foreign matter may hamper subsequent
metallurgical operations or with a view to economical
transport'.
4. The above position may be brought to the notice of
Commissioners under your charge so that pending disputes, if
any, may be decided accordingly."
26. The aforesaid Circular clarifies that crushing and screening are
mere preparatory processes and do not constitute the special treatment
contemplated in the Explanatory Notes, by which part or all of the
foreign matter is removed. In other words, it has been clarified that
ores that have been merely subjected to the processes of crushing and
screening, cannot be said to have been concentrated, as the said
processes do not result in removal of part or whole of the foreign
19
C/85365/2017
matter. It has been explained that crushing and screening followed
with processes such as milling, hydraulic separation, magnetic
separation, floatation and concentrate thickening have to be
undertaken for ores to be converted into concentrate. In other words,
the process of milling with hydraulic separation, magnetic separation,
processes of concentrate thickening are, inter alia, the special
processes and special treatments contemplated in the Explanatory
Notes which result in removal of part or whole of the foreign matter.
27. In the instant case, both the show cause notice as also the
impugned order, after extracting the pictorial representation from the
global website of Vale International have categorically asserted that
the mined ore at Carajas, Para, Brazil underwent two preparatory
processes mainly crushing and screening at Carajas, Para, Brazil,
before shipment of the same. It is evident from the aforesaid pictorial
representation of the stage-wise extraction process of Iron Ores, that
there are total of 11 stages involved from the extraction of the ore
from the Carajas Mine to its shipment from Brazil. These sequential
stages are titled in the pictorial representation as Infrastructure,
Extraction, Transport, Crushing, Conveyor Belt, Screening, Stockyard,
Recovery, Loading, Rotary car dumpers and Shipment. Out of these 11
stages, only 2 stages deal with physically preparing the ore for
shipment, which are crushing and screening. In the process of
crushing, the ore which has been mined and is in the shape of a
boulder/uneven blocks of upto 15 meters, is crushed using a primary
crusher into smaller size. The webpage further reads that the ore may
pass through the crusher upto three times. The crushed ore is
thereafter carried in a conveyor over 85 km, where it is screened. The
20
C/85365/2017
pictorial representation records that Vale has 17 production lines at its
screening site, where the crushed ore is sorted basis the size of the
crushed ore.
28. It is an undisputed position, as is also claimed by CBIC, that
mere crushing and screening of ore, does not result in removal of part
or whole of a foreign matter and that Iron Ore, which has been
subjected to crushing and screening cannot be said to have been
concentrated, by the removal of gangue i.e., the foreign matter from
the ore. It needs to be noticed that both, the show cause notice and
the impugned order, have in passing, contended that processes,
beyond crushing and screening, have been undertaken on the Iron Ore
at Carajas, Para, Brazil. However, no evidence has been led to even
suggest, let alone prove, that other processing had taken place at
Carajas, Para, Brazil. The burden to prove that processes beyond
crushing and screening had been carried out was on the Revenue, but
it failed to establish. It is, therefore, not possible to accept the said
contention of the Revenue.
29. What needs to be now examined is whether Iron Ore Carajas
Sohar supplied from Oman, which is a blend of Iron Ore Carajas and
Iron Ore concentrate, in which the proportion of Iron Ore Carajas is
90-95% and that of Iron Ore concentrate is 5-10%, is a concentrate or
not. The process of blending/mixing undertaken at Oman is a physical
process where iron ore fines from the Carajas mines are mixed with
iron ore concentrates from the Southeastern System in the ratio of 90-
95% of iron ore fines from Carajas and 5-10% of Iron Ore
concentrate. In this process, there is no removal of part or whole of
the foreign matter and, therefore, the same cannot be said to be a
21
C/85365/2017
special treatment resulting in the ore becoming a concentrate. This
apart, the blend of iron ore fines (90-95%) with iron ore concentrate
(5-10%) would, by applying Note 3(b) to the General Rules of
Interpretation to the Import Tariff, be classified as iron ore fines, as
the essential character to the mixture is derived from the iron ore
fines. The processes to which the imported iron ore fines have been
subjected to, such as crushing, screening, and physical blending/
mixing, are not processes by which gangue is separated from the
mineral ore. It is only when the process of crushing and screening are
followed with the process of milling and thereafter hydraulic
separation, magnetic separation, floatation and concentrate thickening
that the ore can be said to have been concentrated.
30. The impugned order, however, holds that Vale International was
using water for removal of impurities. This finding has been arrived at
by an incorrect extrapolation of the pictorial representation in the
impugned order. It needs to be noted that the show cause notice had
not made any reference to the aforesaid pictorial extract from the
website. It is on the bases of the incorrect pictorial representation that
the impugned order holds that at Cajaras, Vale was using several
equipment such as filters, pumps, thickeners, magnetic separators,
floatation column for removal of impurities. It is evident from the
website of Vale that conventionally, where the ore is of a low grade,
the use of water and equipment such as filters, pumps, thickeners,
magnetic separators, floatation column, in addition to crushers and
screens is envisaged. On the other hand, the website records that the
Iron ore extracted at Carajas is rich iron ore and dry processing is
undertaken. The Vale website does not admit use of any water for
22
C/85365/2017
processing or that there was any removal of part or whole of the
gangue from the iron ore. The website of Vale, as has been relied upon
by the Department, itself shows that from 2008 onwards it only
undertakes dry processing.
31. The contention of learned special counsel for the Department
that since Carajas is in the region where it rains almost the entire
year, the processes carried out for removal of impurities cannot be
said to be without the use of water, cannot be accepted. This
submission overlooks the fact that only crushing and screening
activities were undertaken at Carajas, Para, Brazil and that neither of
the two would result in separation of part or whole of the foreign
matter, which is a pre-requisite for concentrating the ore. This apart,
the show cause notice has not made any reference to the aforesaid
pictorial extract from the website.
32. Learned special counsel for the Department also contended that
the imported iron ore was not the one that was naturally extracted,
but an ore which was subjected to processes crushing, screening,
blending. to make it fit for direct use in pellet making. In support of
this contention, the learned special counsel for the Department relied
upon the Technical Analysis report dated 06.05.2016 by Professor
Rathod, VJTI and a letter dated 28.04.2016 of Shri D.K. Swamy,
Administrative Officer, Indian Bureau of Mines, Ministry of Mines.
33. This contention of learned special counsel for the Department
cannot also be accepted for the reason that the CBIC has itself in the
Circular dated 17.02.2012 clarified that crushing and screening are
mere preparatory processes and do not tantamount to concentrating
23
C/85365/2017
an ore, as there is no special treatment involved in the same and that
it is only through the additional process of milling, hydraulic
separation, magnetic separation, floatation and concentrate thickening
that a part or whole of the foreign matter is removed, so as to
concentrate an ore. Even the process of blending does not result in
removal in any of part or whole of the foreign matter, so as to
tantamount to concentrating the ore. The report dated 06.05.2016 of
Dr. Rathod cannot be relied upon. Iron ore, being a naturally
occurring product, the composition thereof as also the composition of
the gangue associated with the same varies from mine to mine,
location to location, region to region. There can be no basis to impute
any certainty that alumina to silica ratio would always be greater than
1 in case of natural ores. The appellant had, in the reply,
demonstrated that naturally occurring high grade iron ores, even in
India at the Bacheli and Bailadila of NMDC have the alumina to silica
ratio less than 1. The impugned order as also the evidence relied in
support of the same have not disputed this position. The report of Dr.
Rathod could not, therefore, have been relied upon to hold that what
had been imported by the appellant was Iron ore that had been
concentrated. The contents of the letter dated 28.04.2016 of Shri D.K.
Swamy, Administrative Officer in the Indian Bureau of Mines are
contrary to the opinion of the Ministry of Mines, as communicated of
the Circular dated 17.02.2012.
34. The contention of learned special counsel for the Department
that the imported goods were fit for directly being used in pellet
making cannot also be accepted. Apart from the fact that this may not
24
C/85365/2017
be a factor for determining whether the goods that had been imported
were 'concentrate', even otherwise, it is not in conformity with the
statement of Shri Jyotindra Deshmukh who was handling the
operations of Pellet Plant of the appellant.
35. It, therefore, follows that the process of crushing and screening
undertaken on the Iron Ore after they have been mined at Carajas,
Brazil and subsequent blending at Oman with 5-10% iron ore
concentrate would result in classification of the goods imported under
CTI 2601 11 31 as Iron Ore fines and would consequently be entitled
to the benefit of exemption from payment of CVD under the
notification dated 17.03.2012.
36. The impugned order dated 30.11.2016 passed by the Principal
Commissioner, therefore, cannot be sustained and is set aside. The
appeal is, accordingly, allowed.
(Order Pronounced on 03.06.2022)
(JUSTICE DILIP GUPTA)
PRESIDENT
(C.J. MATHEW)
MEMBER (TECHNICAL)
Shreya
25
C/85365/2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH
CUSTOMS APPEAL NO. 85365 OF 2017
(Arising out of Order-in-Original No. CCP/ADJ/AKJ/06&07/2016 dated 30.11.2016
passed by the Principal Commissioner of Customs (Preventive), Mumbai)
M/s Amba River Coke Ltd. ...Appellant
2nd Floor, Innovation Centre
Geethapuram, Dolvi, Taluka Pen,
District Raigad-402 107
VERSUS
Principal Commissioner of ...Respondent
Customs (Preventive),
Marine & Preventive Wing
2nd Floor, New Customs House,
Ballard Estate,
Mumbai 400 001
APPEARANCE:
Shri Vipin Jain, Shri Vishal Agarwal and Shri Abhishek Kapadia, Advocates
for the Appellant
Shri S.K. Mathur, Special Counsel for the Department
CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
Date of Hearing: 27.04.2022
Date of Decision: 03.06.2022
ORDER
Order Pronounced on June 03, 2022.
(JUSTICE DILIP GUPTA) PRESIDENT Shreya